Do You Need Life Insurance?

Obviously the first question that you need to ask and answer is whether you even need life insurance. The best way to save money is to not buy life insurance, if you don't need it. So how do you determine if you need health insurance. Well you will need to ask you self some questions to determine if life insurance is right for you:

Long Term Concerns

The following questions will help you determine if you need life insurance to cover and long term needs and expenses of your family and loved ones:

1. How many people depend on your income?
   If you have nobody that is dependant on your income and earning capacity then you probably don't need life insurance. (If you answered none to this question, then skip down to the short term concerns to determine if you need life insurance to cover any short term needs.)


2. How much would your dependents need to cover living expenses?
   There are several ways to determine this value, but the easiest is to start with amount of income that you bring home. From this amount, subtract the amounts from public sources (i.e. Social Security benefits) and all private insurance plans that already provide coverage (i.e. employer funded plans) Next subtract the liquidation value of any property that they would inherit from you. You might also consider subtracting other likely sources of income, such as the help reasonably affluent grandparents would provide for your children in case of disaster (but only do this if you are sure that this assistance would actually be available.)


3. How long would it take your dependents to become self-sufficient?
   If your children are older and are almost out of college, they may not need much additional income. If your children are younger, remember that dependent spouses caring for young children can usually return to work at some point when determine the length of time your family needs income.

Short Term Concerns

The following questions will help you determine if your family has any short term needs and expenses that would require life insurance:

1. What assets would be available to take care of your dependents' immediate financial needs?
   You will need money in joint or pay-on-death bank accounts, or place marketable stocks in joint tenancy or register them on beneficiary (transfer-on-death) forms in order to provide you family with immediately available funds on your death.


2. Will your estate owe substantial debts and/or taxes after your death?
   If your estate has mostly "non-liquid" assets (real estate, collectibles, a share in a small business, jewelry), there may be a significant financial loss if these assets must be sold quickly to raise cash to pay bills, as opposed to what they could be sold for later if there had been enough liquid money from insurance or other sources to meet all pressing bills. Obviously, if your estate has significant funds in bank accounts or marketable securities, you won't need insurance for this purpose. Federal estate taxes won't be due until nine months after death, so cash to pay them doesn't have to be immediately available.